Vapo Oy Interim Report 1 May–31 December 2014

September–December

• Group turnover in the September–December period was EUR 159.4 million (EUR 207.2 million in the same period in 2013)
• Operating margin (EBITDA) was EUR 25.7 million, or 16.1% of turnover (EUR 28.3 million, 13.7%).
• The operating result (EBITA) was EUR 14.1 million, or 8.9% of turnover (EUR 11.3 million, 5.5%). The operating result includes one-off items of EUR 3.0 million (EUR 3.3 million).
• Free cash flow before taxes was EUR -4.5 million (EUR -7.7 million).
• Gross investments were EUR 19.3 million (EUR 21.9 million).
• Net investments were EUR 10.8 million (EUR 4.3 million).
• 3.7 TWh of energy peat was delivered (3.7 TWh).

May–December

• Group turnover in the May–December period was EUR 291.8 million (EUR 365.5 million in the same period in 2013).
• Operating margin (EBITDA) was EUR 39.2 million, or 13.4% of turnover (EUR 42.3 million, 11.6%).
• The operating result (EBITA) was EUR 10.9 million, or 3.7% of turnover (EUR 7.4 million, 2.0%). The operating result includes one-off items of EUR 3.0 million.
• The pre-tax return on invested capital (ROIC) was 4.3% (0.3%).
• Free cash flow before taxes was EUR -36.8 million (EUR -27.7 million).
• Gross investments were EUR 54.9 million, ratio to depreciation 2.0 (EUR 38.7 million, 2.2).
• Net investments were EUR 36.0 million, ratio to depreciation 1.3 (EUR 21.1 million, 1.2).
• The equity ratio on 31 December 2014 was 35.9% (37.1%).
• Interest-bearing net debt on 31 December 2014 was EUR 399.0 million (EUR 376.0 million).
• The ratio of interest-bearing net debt to operating margin (net debt / EBITDA) on 31 December 2014 was
  5.6 (4.8).
• 5.7 TWh of energy peat was delivered (5.5 TWh).

On 1 May 2014, the company adopted thrice-yearly reporting instead of the previous quarterly reporting. The comparison figures for the period 1 May–31 December 2013 are presented where available.

 

CEO Tomi Yli-Kyyny on the second third of the year: Vapo fulfilled its promises regarding environmental investments and focused on improving the security of supply

According to a customer survey conducted in the autumn, nearly 80 per cent of Vapo’s customers are satisfied with the company. Vapo received praise regarding areas including the reliability of supply, quality, and responsibility. The aspect that Vapo’s customers value most is that deliveries are made on time, as agreed. Vapo has increased its fuel reserves to ensure fuel deliveries to all of its customers in the upcoming heating season and the one following it.

Fuel tax on energy peat was reduced at the beginning of 2015 from EUR 4.9/MWh to EUR 3.4/MWh. The subsidy for electricity production from wood chips was increased correspondingly. At the same time, taxes on imported fuels increased. The overall impact of the changes in taxes and subsidies on the markets and the company’s result will become more evident in the next heating season. Vapo expects the Finnish Government to stick to its stated plan of lowering the tax on energy peat in 2016 to the same level as in 2012, or EUR 1.9/MWh.

Vapo revised its strategy in 2014. The company’s goal is to be the world leader in the local energy value chain. This means even closer cooperation with customers to develop products and services according to customer needs. Vapo will seek growth particularly in heating production, in areas close to its own fuel reserves. During the period under review, Vapo acquired the district heating businesses of Åstorps Bioenergi AB and Sysmä municipality. Vapo also restructured its organisation at the beginning of 2015 to match its new strategy.

The commitments made for 2014 as part of Vapo’s environmental programme have been fulfilled, with the total investment in the programme now exceeding EUR 30 million. In the next production season, all production areas will be covered by the best available technology. Vapo has also further enhanced environmental inspections in peat production. Going forward, Vapo will continue to focus on transparency in operations and communications on the overall impact of the use of peat. Only 0.7% of Finnish peatlands are used for peat production, but the public perception is that this figure is much higher. However, the popularity of peat has increased among growing concerns about self-sufficiency in energy and the security of supply, and because peat production preserves and creates jobs. Vapo has contributed to improving the security of supply by consciously increasing its fuel reserves. At the end of the reporting period, Vapo had nearly 19 TWh of energy peat in its reserves, which is equal to nearly two years’ worth of demand.

Consolidated key figures 

MEUR	9–12/ 2014	9–12/ 2013	5–12/ 2014	5–12/ 2013	1/2013– 4/2014
Turnover	159.4	207.2	291.8	365.5	847.4
Operating profit (EBITA)	14.1	11.3	10.9	7.4	50.1
% of turnover	8.9	5.5	3.7	2.0	5.9
Operating profit (EBITA) before impairments	14.1	11.9	10.8	8.0	53.9
% of turnover	8.9	5.7	3.7	2.2	6.4
Result for the period	7.1	0.5	0.1	-7.1	22.4
Operating margin (EBITDA)	25.7	28.3	39.2	42.3	110.9
+/- Change in working capital	-19.4	-31.7	-40.1	-48.9	-27.5
– Net investments	-10.8	-4.3	-36.0	-21.1	-21.6
Free cash flow before taxes	-4.5	-7.7	-36.8	-27.7	61.8
Gross investments	19.3	21.9	54.9	38.7	57.5
Return on invested capital % *			4.3	4.7	3.9
Return on invested capital % before impairments *			4.7	4.8	4.4
Return on equity % *			1.9	5.7	1.2
Balance sheet total			818.8	840.5	786.9
Shareholders’ equity			279.8	296.0	298.6
Interest-bearing net debt			399.0	376.0	329.0
Equity ratio %			35.9	37.1	39.4
Interest-bearing net debt/operating margin			5.6	4.8	4.4
Gearing %			142.6	127.0	110.3
Average number of employees			977	1,128	1,091

*) Previous 12 months
**) In calculating the equity ratio, the capital loan on the balance sheet was calculated as shareholders’ equity

Developments by business segment

Turnover by segment 

MEUR	9–12/ 2014	9–12/ 2013	Change %	5–12/ 2014	5–12 /2013	Change %	1/2013– 4/2014
Peat Products	59.3	61.5	-3.6	94.9	97.4	-2.5	264.2
Energy peat	52.6	54.0	-2.6	81.2	79.6	2.1	235.5
Environmental peat	8.3	8.9	-7.2	16.0	17.8	-10.3	34.9
Wood Fuels	28.1	48.0	-41.5	46.2	71.3	-35.2	182.1
Forest fuels	15.0	18.3	-17.9	23.6	29.3	-19.6	69.5
Pellets	13.0	29.8	-56.2	22.6	42.1	-46.3	113.0
Heat and Power	34.6	35.1	-1.3	53.3	52.9	0.7	143.9
Kekkilä Group	19.4	19.5	-0.5	52.1	60.0	-13.1	125.7
Vapo Timber	28.5	52.7	-45.9	59.5	99.8	-40.4	179.7
Others	4.3	3.7	17.5	8.2	7.9	4.6	13.4
Forest BtL	0.0	0.0		0.0	0.0		0.0
Mustankorkea	4.0	3.7	8.9	7.8	7.8	0.1	13.4
Group administration & shared by businesses	0.3	0.0		0.5	0.1		0.0
Inter-segment turnover	-14.8	-13.3	-11.2	-22.5	-23.8	5.3	-61.6
Total	159.4	207.2	-23.1	291.8	365.5	-20.2	847.4

 Operating profit/loss by segment

MEUR	9–12/ 2014	9–12/ 2013	Change %	5–12/ 2014	5–12/ 2013	Change %	1/2013 4/2014
Peat Products	12.3	14.4	-15.1	17.5	19.0	-7.8	56.8
Energy peat	10.7	12.6	-15.8	15.1	16.0	-5.5	52.1
Environmental peat	1.6	1.8	-13.3	2.4	3.0	-20.2	4.7
Wood Fuels	1.4	1.3	6.7	-0.8	-0.7	-2.1	2.8
Forest fuels	0.8	-0.3	405.0	0.5	-0.5	198.3	1.2
Pellets	0.7	1.6	-58.5	-1.2	-0.3	-380.5	1.5
Heat and Power	3.1	1.8	70.5	-1.1	-2.3	51.1	9.3
Kekkilä Group	-2.9	-3.0	1.1	-2.2	-0.8	-192.0	1.7
Vapo Timber	0.0	-0.6	103.5	0.7	-2.7	126.3	-5.2
Others	-3.9	-3.2	-23.7	-8.0	-6.1	-30.6	-17.0
Forest BtL	-0.4	-0.4	10.3	-0.6	-0.9	33.5	-5.5
Mustankorkea	1.0	0.9	11.0	1.8	2.0	-12.1	2.9
Group administration & shared by businesses	-4.5	-3.6	-24.7	-9.2	-7.2	-26.6	-14.4
Eliminations	4.1	0.5	718.0	4.8	1.0	353.5	1.6
Total	14.1	11.3	24.1	10.9	7.4	45.8	50.1

Interim Report T2/2015 (pdf)

For further information please contact;

• Tomi Yli-Kyyny, CEO, Vapo Oy, tel. +358 20 790 5605
• Suvi Kupiainen, CFO, Vapo Oy, tel. +358 20 790 5516